Earlier this year, the Michigan Legislature debated the best way to provide citizens
with much-needed relief from burdensome state income taxes. Some legislators argued for a
cut in the tax rate, while others favored raising the personal exemption.

Lawmakers finally adopted Governor Englers plan to cut Michigans 4.4
percent tax rate by a half-percent over five years. Will the rate cut really provide
workers with greater relief than a larger personal exemption?

The answer is yes, and heres why. A bigger personal exemption would lower your
tax bill by taxing less of your current income, but if you earned additional
incomewhether from a raise, working longer, taking another job, or investingit
would be taxed at the higher 4.4 percent rate.

If instead the rate were cut a half-percent to 3.9 percent, the same amount of your
income would be subject to tax, but at a lower rate. You could also keep more of any extra
income you earned.

In other words, lower tax rates not only leave more money in workers pockets,
they encourage economic growth by creating incentives for people to be more productive.

Lansing did the right thing for Michigan workers by cutting the income tax rate.